Trump tariffs could trip up one of the hottest semiconductor stocks of the past five years not named Nvidia (NVDA).
KeyBanc Capital Markets senior research analyst John Vinh slashed his rating on AI darling Advanced Micro Devices (AMD) to Sector Weight from Overweight on Tuesday. The call is somewhat against the grain, as 64% of the sell-side analysts on Wall Street rate AMD a Strong Buy or Buy, according to Yahoo Finance data.
Vinh said there are three main factors behind his downgrade:
Increasing concerns regarding the sustainability of AMD’s China AI business. “While near-term demand trends are driving increased demand for the MI308 from Chinese hyperscalers, we are increasingly concerned whether this is sustainable given concerns that further export restrictions will be levied by the U.S.,” Vinh wrote.
Increasing risk to gross margin given a potential price war with struggling rival Intel (INTC).
Limited opportunities to gain additional share compared to Intel and increasing competition given the progress Intel is making on 18A chips.
AMD stock jumped nearly 5% in early trading as part of a broader snap-back rally in stocks as tariff fears subside, at least for one session.
As of 11:28:14 AM EDT. Market Open.
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Read more: What Trump’s tariffs mean for the economy and your wallet
AMD has pushed back on fears of AI demand slowing amid economic uncertainty and profit risk from tariffs.
“I do think that there could be some short-term impacts,” AMD CEO Lisa Su told me in a Yahoo Finance last week (video above). “I think it’s too early to say what the longer-term impacts are. I think we have to look at how things play out over the next number of months.”
AMD derives 66% of its sales internationally. Its cutting-edge chips are manufactured by behemoth Taiwan Semiconductor (TSM). While the Trump administration exempted semiconductors as part of its tariff push, a global trade war could raise the cost of production for AMD and its competitors — and likely bleed through to end products such as PCs.
“If you look at the baseline, the baseline is we do want a more resilient supply chain. Resilient supply chains are important for every industry. They’re especially important for the semiconductor industry. We are big supporters of US manufacturing,” Su said.
Despite the tariff uncertainty, Su isn’t waiting to invest in her business.
AMD this month closed on its $4.9 billion acquisition of ZT Systems. Announced in August 2024, the deal is expected to bolster AMD’s presence in compute infrastructure for hyperscalers. ZT Systems counts Microsoft (MSFT) as a key customer, as does AMD.
